EL-ERIAN: The Risk Of Collateral Damage And Unintended Consequences Caused By The Fed Is Material And Growing

Mohamed El-Erian, CEO of PIMCO, is out with his latest criticism of the Federal Reserve's efforts to bolster the economy.

"The Fed increasingly finds itself in a large and deepening policy dilemma," he wrote in The Financial Times.

El-Erian notes that "the Fed has no choice but to consider another mix of unconventional measures – specifically, additional purchases of securities, a lower interest rate on excess reserves, an even more aggressive communication policy, and enhanced access to the discount window."

However, he thinks that even these moves may prove ineffective. Even worse, the actions could prove harmful:

But, more of the same will not have a durable beneficial impact, especially if other policymakers remain missing in action. Indeed, the advantages of another round of unusual Fed activism are declining while the risk of both collateral damage and unintended consequences is material and growing.

El-Erian notes that the next move for policymakers is tackling the "fiscal cliff," the impending expiration of over $600 billion dollars worth of government spending programs and tax cuts. He hopes that Bernanke was able to communicate the urgency of the matter.